Buffalo Wild Wings clipped on valuation and outlook

Shares of Buffalo Wild Wings
/quotes/zigman/91104/quotes/nls/bwldBWLD got pummeled Wednesday after a disappointing outlook forced analysts to rein in their earnings estimates and called into question the stock’s valuation.

“The guidance implies the slowest growth in the last five years,” Feltl and Company analyst Mark Smith wrote. “We think guidance for the slowest earnings growth since the company’s IPO is disappointing, especially given the extra operating week, London Olympics and additional Thursday night NFL football games this year.”

In the last four weeks, same-store sales growth slowed to 3.8% at company-owned restaurants of Buffalo Wild Wings.

Menu prices have gone up at Buffalo Wild Wings, which faces the highest chicken wing prices in a decade.

The company is currently paying $2.07 a pound for chicken wings, up from $1.42 a year ago.

Still, Buffalo Wild Wings CEO Sally Smith told MarketWatch “our sales have held up nicely on wings. We don’t think there is resistance” to higher menu prices. She added that Buffalo Wild Wings has dealt with fluctuating wing prices during its 30-year history. “We know how to manage it. We’re pretty resilient.”

When he downgraded Buffalo Wild Wings to sell back in February, Feltl’s Smith argued surging prices for jumbo chicken wings would slow annual profit growth and put the company’s premium valuation at risk.

He is the only analyst of 19 following the company with a sell rating on Buffalo Wild Wings, according to FactSet.

Smith believes Buffalo Wild Wings stock is worth $68, or 19 times his estimate for the company to earn $3.60 a share in 2013.

That compares with the average forecast for Buffalo Wild Wings to earn $3.65 next year. Before the earnings report, the average estimate was $3.81.

Story Conversation

About The Tell

The Tell is MarketWatch’s fast and engaging look at trends and themes in the day’s markets. Drawing on our reporters, analysts and commentators around the world, as well as selecting the best of the rest online, The Tell is all about the pulse of the markets through news, insight and strategic information to help you make the best investing decisions. Got a tip? Tell us at TheTell@MarketWatch.com